Courier Friends to Follow

The rise of the TARP state

By Rich Lowry
Columnist

POSTED:April 22, 2009 11:18 a.m.

The National Security Act of 1947, a reorganization of the foreign-policy and military apparatuses of the U.S. government, created what historians call “the national security state.” Critics complain that the national security state vastly empowered government and cut the executive branch loose from legislative accountability. It marked the beginning of a hyperactive interventionism abroad.Domestically, all the same criticisms apply to the consequences of the Troubled Assets Relief Program, which marks a new era in American economic policy just as the 1947 act did in foreign policy. Since last fall, we have seen the rise of the TARP state, characterized by sweeping interventions in the economy undertaken by the executive branch on its own authority or in defiance of the legislature. Even its harshest detractors have to admit the National Security Act did what it said; TARP is a great misnomers in U.S. government. So far, the program has had nothing to do with troubled assets and has been used for purposes far afield from the justification — getting such assets off the balance sheets of the banks — presented to Congress when it passed last fall.How many legislators thought that in supporting TARP they were giving the federal government the power to bail out the auto industry, let alone fire a CEO and effectively run the companies?As he was using the leverage created by TARP to fire GM’s CEO, President Barack Obama guaranteed warranties for GM and Chrysler cars. He set up special warranty accounts — funded, naturally, with TARP dollars. TARP is an endlessly flexible slush fund that has given the federal government warrant to intervene in the private sector however it pleases.The administration doesn’t only get to decide who gets TARP funds and on what basis, but whether firms can give the money back. In a meeting with bankers at the White House, Obama told those bank CEOs wanting to return federal dollars that they couldn’t yet. The administration is on the verge of extending TARP funds to life-insurance companies, the latest sector of the economy agitating for government largesse. And TARP funds will contribute to the administration’s $1 trillion public-private plan to remove toxic assets from the banks, a plan structured to do a naked bootleg around any need for congressional approval.Whatever he thinks of Obama’s policies, former Vice President Dick Cheney should be delighted as an advocate of executive power. Obama has pocketed, in fact or in theory, all the presidential war powers defended by President George W. Bush, while expanding with relish the executive’s role in the economy. In Obama, the national security state has met the TARP state.The national security state is necessary given America’s pre-eminent global role. And some sort of rescue had to pass during last fall’s financial panic. But TARP has become a disgraceful transgression of democratic accountability and the wedge for a retrograde, highly politicized industrial policy. Nothing good can come from the TARP state.

Lowry is editor of the National Review and co-author of the new spy thriller “Banquo’s Ghosts.”